My Investment Blueprint

1 Introduction: In nine chapters I have compiled a guide that I use to structure my own investment approach – it comes from an individual investor´s perspective and experience. I put together a rulebook for systematic investing and trading to serve as a guideline to create and evolve a written investment plan to manage my…

Who will be King – Fundamentals or Technicals?

Looking at equity markets at the beginning of the new year, specifically the S&P 500 as the most followed benchmark, I see an interesting divergence between the severely negative technical state of the market and the largely sound fundamental environment which only shows partial deterioration. Which side is likely to win the battle? Are technical indications…

The Hardest Trading Environment

Has 2018 actually been one of the most difficult trading environments one can encounter? Of course a 50% equity decline in a severe bear market, as we saw in 2000 or 2008, for example, looks much worse on paper, but a broadly diversified portfolio did not do nearly as bad. A substantial allocation to treasury bonds…

Trading Parabolic Moves (…after the fact)

There is nothing like a story of extraordinary gains to play havoc with investor psychology. Especially when it is founded on asset price moves of a magnitude that could mean life changing levels of profit – if you had only participated in it. Such parabolic irrational exuberances, that drive prices and valuations to unsustainable extremes, happen…

Short Option Overlay for Trend Positions

One of the most frustrating things about a long- and medium-term trend strategy (including the super long-term trend following idea of buy-and-hold) is that prices seem to spend most of the time going nowhere and often retrace to give back a portion of those nice book profits. „The (buy-and-hold) investor only spends about 22% of…

Dealing with Sudden Market Regime Change

The realized return of different strategies and asset classes changes dramatically over time. Targeting these varying risk premia promises great opportunity – adjusting portfolio leverage at the right time has the potential to enhance profits in good times and curb losses in bad. The holy grail in investing would be to find ways to pinpoint…

Mistake Parade I

Large drawdowns are the most difficult time for an investor and trader. They are painful, but unavoidable when investing with the goal of high risk-adjusted returns. Return is based on taking risks and sometimes these risks are bound to materialize as strings of losses. This will happen regularly in a realm where each outcome is…

Focusing on Position Sizing

Rather than searching for the perfect strategy, the level of exposure to risk is a more important ingredient to successful investing. Every trading edge is going to be naturally constrained by the arbitrage activity of all market participants – extraordinary profit opportunities will be temporary at best. Asset classes, investment strategies (eg. value & momentum…

There ain´t no Secret

There is no secret trading or investment strategy, that will beat all others.   There are many ideas that work and related ideas all have very similar characteristics, leading to virtually the same risk-adjusted return over time across strategy types. For example (average data from my backtests, books, articles, academic papers etc.): Trend following strategies …

A Barbell Portfolio Strategy

with a realtime review of portfolio performance during the recent market pullback. I want to take a look at some of my core portfolio strategies from a fresh angle. The basic principles discussed are easily transferable to other types of portfolios. A key portfolio feature, I strive for, is an adaptive combination of strategies with…